Insurance Information: Good or Bad Faith?

When dealing with home or property insurance claims, the term "good faith" often comes up. It might sound like something out of a handshake deal, but in the world of insurance, it carries significant legal weight. 

If you're a homeowner dealing with insurance claims, understanding and applying "good faith" within your claim can help ensure you’re treated fairly by your insurance company. 

What is "Good Faith"?

At its core, "good faith" refers to the honest intention to act without taking advantage of another party. In the context of home insurance, this means that both you, the policyholder, and the insurance company are expected to be honest, transparent, and fair in all dealings related to your policy and any claims you file. For homeowners, it means providing truthful information when filing a claim. For insurance companies, it means handling your claim with integrity and transparency.

The Role of Good Faith in Your Insurance Policy

When you purchase an insurance policy, you're entering into a contract. This contract outlines your responsibilities (like paying your premiums) and the insurer's responsibilities (like covering certain damages). The principle of good faith underpins this relationship.

For insurance companies, acting in good faith means they must:

1. Fairly evaluate your claim: Insurers are obligated to assess your claim thoroughly and without bias, considering all relevant information before making a decision.
2. Communicate promptly: They should keep you informed about the status of your claim, responding to inquiries in a timely manner and providing clear explanations for their decisions.
3. Pay valid claims without unnecessary delay: If your claim is covered under your policy, the insurance company should process and pay it promptly, without dragging their feet.
4. Investigate claims properly: This involves conducting a reasonable and adequate investigation into the damage or loss before deciding whether to approve or deny the claim.

For you, as the homeowner, acting in good faith means:

1. Providing accurate information: When you purchase your policy and when you file a claim, it's crucial to be truthful about the details of your home, the damage, and any circumstances surrounding your claim.
2. Cooperating with the insurer: This includes allowing access to the damaged property, providing any requested documentation, and responding to the insurer’s questions or requests.
3. Not inflating or fabricating claims: Attempting to claim more than the actual damage or making a false claim can lead to your entire claim being denied and even legal repercussions.

Examples of Good Faith in Action

• From You: Let’s say a storm damages your roof, and you file a claim. Acting in good faith means you accurately report the extent of the damage, provide any necessary documentation, and follow through with any requests from the insurance company. It also means not exaggerating the damage in hopes of getting a bigger payout.
• From Your Insurer: On the flip side, your insurance company should inspect your claim promptly, keep you informed about the status of the claim, and offer a settlement that fairly reflects the cost of repairing your roof. They shouldn’t drag their feet, avoid your calls, or try to deny your claim without a valid reason.

What Happens When Good Faith is Breached?

For insurance companies, failing to act in good faith—often referred to as "bad faith"—can lead to legal consequences as well. In extreme cases, you can sue your insurer for acting in bad faith. This can result in them having to pay not only the original claim amount but also additional damages.

When an insurance company fails to act in "bad faith" they might:

• Unreasonably delay processing your claim.
• Deny a valid claim without a legitimate reason.
• Offer significantly less money than what your claim is worth, i.e. don't fully indemnify you.

If an insurance company acts in bad faith, you may have legal recourse, which could include suing for the full value of the claim, as well as possible additional damages. That’s why it’s vital to keep records of all communications and documents related to your claim. 

If you or your insurance company fails to act in good faith, there can be serious consequences. For homeowners, providing false information can lead to claim denial, cancellation of your policy, or even legal action.

How does Good Faith apply to my claim and how do I ensure it?

1. Be Honest and Detailed: When filing a claim, provide all the necessary details and documentation. If you're unsure about something, ask questions. It’s better to be thorough and accurate than to leave out key information.
2. Stay in Communication: Keep an open line of communication with your insurance company. Respond to their requests in a timely manner and document all interactions. 
   1. Bonus Tip: Even if there is not a lot happening regarding your claim, send your adjuster a question at least once per week. This keeps the claim record active and helps to validate future disputes or allegations of wrong-doing or non-responsiveness.
3. Know Your Policy: Understanding the specifics of your insurance policy can help you ensure that both you and your insurer are acting in good faith. This knowledge can also help you identify when something seems off.
4. Seek Help When Needed: If you feel your insurance company isn’t acting in good faith,  i.e. unreasonable delays or denials, or unfulfilled indemnification, you have options. You can make an account on Tugboat for personalized help, contact your state’s insurance department, or consult with an attorney who specializes in insurance claims.

Conclusion: Good Faith is Key to a Smooth Claims Process

"Good faith" may sound like a vague legal concept, but it’s an essential part of your relationship with your insurance company. By understanding this concept and making sure both you and your insurer stick to it, you can help ensure that your home insurance claims process is fair, transparent, and stress-free.

The next time you’re dealing with a home insurance claim, remember that good faith is the foundation that keeps everything running smoothly. Whether it’s providing accurate information or ensuring your insurer is treating you fairly, good faith is the key to a positive outcome.

If you have any questions or think your insurance claim is being treated in bad faith, feel free to create an account on Tugboat's platform. We’re here to help you every step of the way!